AWS Cloud Enterprise Strategy Blog
Digital Transformation: The Why, Who, How, and What – Part 3, “The How”
In part one, ‘The Why’ blog post, we discussed why digital transformation is needed for organizations, followed up by part two, ‘The Who’, which covered how successful organizations are rethinking their approach to organizational structure, learning, innovation, and culture. In this blog post, we dive deeper into the process of digital transformation.
Contemporary Process Requirements
Digitally transformed organizations have these abilities in common: they move quickly, utilize new technologies to solve business problems, redefine customer experiences, and deliver value. So, their operational processes must be flexible, efficient, lightweight, and absorbed via self-learning. Flexibility allows processes to be adapted to various business situations without the need for a complete redesign and, therefore, with minimal disturbance. Self-learning goes one step further and factors in learnings from previous iterations of new improvements. At Amazon, we call these self-learning processes mechanisms. Transformation leaders should strive to empower their teams through principles, guardrails, and outcome-based development to eliminate extra processing or approval steps. Automatic approval is adequate for low-risk decisions and reduces processing time and cost.
Examples of Ineffective Transformational Processes
Based on our experience, four significant areas impede the transformational processes of digital transformation:
Lack of Digital Transformation Strategy or Clear Motivation
As we stated in the first blog ‘The Why‘, a clear, business-driven digital transformation strategy, supported from the top down, is essential. We have seen many organizations start transformational processes as initiatives to implement new and exciting technology. These organizations declare that they need to launch new initiatives that use artificial intelligence or the “Internet of Things” without clearly tying them to the business needs they are addressing. Your digital transformation strategy is born from your business strategy, not the other way around. At Amazon, we advocate working backward from a company’s needs and then determining the best way to solve the problem, and this often uses the tools of digital transformation.
Strategy and Execution Are Not Connected
In some cases, the transformational strategy is perfectly defined, aligned with all stakeholders, and has top executives’ mandates. But if execution is not connected to the strategy through a proper funding model and does not have the right resource prioritization, failure is inevitable.
Migration Instead of Transformation
Organizations that approach transformation from a tactical level tend to focus on replacing individual workloads—or migrating all or part of them—to a new environment, a new platform, or the cloud. Although beneficial in some regards, this approach is not transformative but incremental. True transformational change comes from reimagining existing processes enabled by new technology. The idea is to use technology to transform an existing service into something significantly better.
Finally, transformational processes largely do not fit into the waterfall paradigm. Waterfall is best for projects with concrete timelines and well-defined deliverables. Digital transformations are full of unknowns, with new things to be learned and experiments to be conducted. It is almost impossible to come up with a complete list of requirements, steps, and criteria upfront and before implementation. The transformational nature of these changes requires the flexibility of processes, adaptability, and self-learning better found in agile projects. The transformational process must achieve interim goals or milestones with tangible business results that can be used immediately to keep the business aligned with the goals and to keep employees motivated
Transformation Process Framework
To help with the digital transformation processes, we have defined and used an AWS transformation process framework. This framework is based on our experience working with customers of different types (enterprise, ISV, large, small, different industries, etc.), and from which we have realized common aspects that benefit all customers. The digital transformation framework consists of three elements: transformation vision and strategy, governance, and process steps.
Digital Transformation Vision and Strategy
High-performing organizations have a well-defined vision that explains their view of the future, and that is supported by a strategy that will realize that future state. Getting these right and ensuring people assist and understand both is crucial to empowering teams to deliver.
A digital-transformation vision is a concise description of the end state of the transformation, for instance: for manufacturing businesses, “Enable zero-downtime assembly process”; or for retail companies, “Make shopping experience convenient and adaptable to changing customer demands and requirements.” Enterprises should be stalwart on their vision but flexible on achieving it.
A digital-transformation strategy is a high-level plan to execute a complex digital transformation initiative. A digital-transformation strategy should include the following elements, at a minimum: detailed objectives derived from the vision (targeting business outcome), stakeholder analysis, principles, critical success factors (CSFs) with key performance indicators (KPIs) to measure success, and digital transformation organizational structure.
When building a digital-transformation strategy, it is critical to identify and articulate the business outcomes, both short-term and long-term. These desired outcomes will help you stay focused through the process of change. The short-term outcome can be a pilot for bigger transformational initiatives and help energize employees. Also, to build a digital transformation strategy, you need to get all stakeholders’ buy-in. Digital transformation is not a smooth sail; it usually goes through rough waters. Stakeholder buy-in helps you stay afloat, quickly adjust the course if necessary, and get support when needed.
Digital Transformation Governance
Governance is an essential part of the transformation process. Governance clarifies accountability and decision-making authority, control of the process, monitoring and measuring progress, and signaling when to take corrective measures. Contrary to common belief, proper digital transformation governance focuses on enabling, not restricting. This way, digital transformation governance itself becomes a CSF. Digital transformation governance includes precepts (policies, principles, and tenets), roles and responsibilities, a funding model, standards, detailed KPIs and metrics, change management, and tools that enable the automation of operations. The main governance body, such as the business/technical review board, is responsible for breaking down silos and sharing data to foster collaboration.
Digital Transformation Process Steps
After defining the digital-transformation vision, strategy, and governance and adopting them across all stakeholders, it is time to start executing using agile approach. Without these definitions, agile projects will result in “wandering” activities with no business value.
Guided by the digital-transformation strategy, the focus should rapidly turn to implementing a ‘minimally lovable project’ that delivers business value and then scaling that solution. We advocate taking this rapid minimalistic approach instead of drawn-out proofs of concept (PoC) as the best way of balancing learning and assessment while still delivering value. Your team must be skilled in the selected technologies, so pay special attention to training the team or obtaining the necessary skills through the partners before each phase of the transformation.
The fourth blog in this series focuses on ‘The What’ and brings to light the technology changes necessary to support digital transformation.